As the novel coronavirus spreads across the world, the global market has taken some serious damage. With the Chinese economy grinding to a standstill, the U.S. economy is not far behind. To put it into context: On Thursday, 28 February, the Dow Jones Industrial Average (INDEXDJX: DJI) fell 1,190 points, its largest one-day point loss ever.
However, a downturn caused by the coronavirus is likely to be shortlived, albeit expensive, and we are already seeing some signs of recovery. But it is possible it could be the catalyst for recession. As the economy falls though, so too will some stocks that many consider overpriced. We don’t know when the next recession could be, but when it comes, these are 3 stocks that represent discount buying opportunities during that time.
If you’re looking for a safe stock that will guarantee long-term growth, then you need look no further than Apple (NASDAQ: AAPL). The iPhone maker is among the most valuable brands on the planet and has experienced growth of more than 130% over the past 5 years, but recently had to update guidance on iPhone sales because of the coronavirus. Its growth cannot be ignored though simply because its stock has fallen close to 8% in the past month.
The coronavirus scare will come and go, but Apple is still the raging giant it always has been. The company has fantastic financials, with an impressive net profit margin of at least 18% in every single one of its last 10 quarters. Even when concerns arose over iPhone sales, the company has found other strengths, namely its push into subscription services which rose 17% last quarter to nearly $13 billion in revenue. If that wasn’t enough, Apple’s wearables segment, which includes the Apple Watch and Airpods, could be a Fortune 150 company on its own.
Berkshire Hathaway (NYSE: BRK.B) CEO Warren Buffett is a massive believer in Apple, recently calling it “the best business in the world”. However, even he has called it overpriced at times, which is a dip in the market such as the current one is a brilliant time to boost one’s portfolio at a discount price. Think of it as a Wall Street Black Friday sale.
Another company that has been forced to update guidance is Microsoft (NASDAQ: MSFT). Its stock fell nearly 12% in a single day on Thursday, February 27, until later recovering to just falling 6%, following the announcement. But don’t let that dip hide from you the fact that Microsoft stock has grown close to 300% in the past 5 years. Any dip in such a large company’s stock price is worth pouncing on because a coronavirus won’t stop Microsoft from making money.
Alongside fellow Big Tech members Apple, Google (NASDAQ: GOOG)(NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN), Microsoft has managed to build itself a near-impenetrable moat. This success has seen it vie with Apple for the moniker of ‘America’s most valuable company’ year after year.
Microsoft’s current coronavirus-related problems will be short-lived, with its core growth driver, Microsoft Azure Cloud, largely unaffected by the virus. Last quarter, revenue from Azure rose 62% while analysts such as JP Morgan (NYSE: JPM) are expecting Microsoft to gain more than 20% this quarter, which will more than make up for the losses. Should the dip continue, it can only spell a good bargain for long-term investors.
As the coronavirus worsens, there will be a lot of uncertainty; but there are some things that are certain:
- More people will start working from home, driving usage in software such as Slack (NYSE: WORK) and Zoom (NASDAQ: ZM).
- A lot of people, sick or otherwise, are going to be cozying up at home to some Netflix (NASDAQ: NFLX).
- More people at home means more boredom, and more need for communication, which means more people are going to be on Facebook (NASDAQ: FB).
As a company that does not rely on manufacturing or a singular product, any drop in its value is just the stock piggybacking on the wider market. Mark Zuckerberg’s social media giant is still highly profitable, sitting on more than $50 billion in cash. As well as that, its stock has risen close to 150% in the past 5 years. The 12% losses of the past month only represent a great opportunity to get this stock at a discount.
No matter what happens, wind, rain, world wars, or viruses, people will always use social media, and Facebook, despite all of its faults, is still the biggest social network out there.
You might be asking yourself: “Is it too late to buy the dip in the market?” Well, the short answer is: definitely not.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Apple, Facebook, and Microsoft. Read our full disclosure policy here.
Editor at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.